EXHIBIT 10.26
STOCK OPTION AGREEMENT
AGREEMENT made as of this 16th day of August, 1999 by and between NEWS
COMMUNICATIONS, INC., a Nevada corporation ("NCI"), and XXXX XXXXXXXXXXX
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("Xxxxxxxxxxx").
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WHEREAS, pursuant to a certain Employment Agreement dated the date
hereof between NCI and Xxxxxxxxxxx (the "Employment Agreement"), Xxxxxxxxxxx has
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become employed as Vice President and Chief Financial Officer of NCI and, in
such capacity will provide valuable services to NCI (terms used but not
otherwise defined herein shall have the meaning set forth in the Employment
Agreement);
WHEREAS, NCI desires to reward such services and encourage
Xxxxxxxxxxx'x continued dedication and to afford Xxxxxxxxxxx the opportunity to
acquire stock ownership in, or otherwise share in the appreciation of the stock
of, NCI so that Xxxxxxxxxxx may have a direct proprietary interest in NCI's
success;
NOW, THEREFORE, in consideration of the covenants and agreements
herein contained, the parties hereto hereby agree as follows:
1. Grant of Option. Upon the terms and subject to the conditions set
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forth herein, NCI hereby irrevocably grants to Xxxxxxxxxxx, during the period
commencing on the date of this Agreement and, unless earlier terminated pursuant
to Section 5 or Section 6 hereof, ending ten (10) years from the date hereof
(the "Expiration Date"), the right and option (the "Options") to purchase from
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NCI, at a price of $1.625 per share, 100,000 shares of NCI's Common Stock, par
value $.01 per share (the "Common Stock"). The Options are not intended to
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qualify under Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Internal Revenue Code of 1986, as
amended (the "Code"), as an incentive stock option.
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2. Vesting and Exercise of Options. The Options shall vest in four equal
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installments of 25,000 shares commencing on the first anniversary of the date
hereof and on each anniversary of the date hereof until the fourth anniversary
of the date hereof when all of the shares subject to the Options shall be
vested; provided, however, that the Options shall be subject to accelerated
vesting as provided on Exhibit A hereto.
3. Method of Exercising Options. Xxxxxxxxxxx may exercise the
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Options by delivering to NCI (i) a written notice stating the number of shares
of Common Stock that Xxxxxxxxxxx has elected to purchase at that time from NCI
and (ii) full payment of the purchase price of the shares of Common Stock then
to be purchased.
Payment of the exercise price for the shares of Common Stock upon any
exercise of the Options may be made by check payable to the order of NCI.
4. Issuance of Common Stock and Payment of Cash upon Exercise of
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Options. As promptly as practicable after receipt of such written notification
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of Xxxxxxxxxxx'x election to exercise the Options and full payment of such
exercise price and any applicable withholding taxes, NCI shall issue or transfer
to Xxxxxxxxxxx the number of shares of Common Stock with respect to which the
Options have been so exercised and shall deliver to Xxxxxxxxxxx a certificate or
certificates therefor, registered in Xxxxxxxxxxx'x name.
5. Death or Disability of Xxxxxxxxxxx. If the employment of
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Xxxxxxxxxxx shall terminate prior to the Expiration Date as a result of the
death of Xxxxxxxxxxx or by reason of his Disability (as defined in that certain
Employment Agreement between NCI and Xxxxxx Xxxxxxx (the "Employment
Agreement"), Xxxxxxxxxxx, the executor or administrator of the estate or affairs
of Xxxxxxxxxxx or the person or persons to whom the Options shall have been
validly transferred by the executor or administrator pursuant to applicable laws
of descent and distribution shall have the right to exercise the Options until
the Expiration Date to the extent that the Options were vested at the date of
death or Disability.
6. Termination of Employment. In the event that the employment of
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Xxxxxxxxxxx shall be terminated by NCI (other than by reason of death,
Disability or for Cause (as defined in the Employment Agreement), Xxxxxxxxxxx
shall have the right, until the Expiration Date, to exercise the Options, it
being acknowledged and agreed that any unvested portion of the Options shall
immediately vest and become exercisable upon the date of such termination of
employment. In the event that the employment of Xxxxxxxxxxx shall be terminated
(i) by NCI for Cause, (ii) by Xxxxxxxxxxx voluntarily, the Options, to the
extent vested on the date of Xxxxxxxxxxx'x termination (the "Termination Date"),
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shall be exercisable until the first anniversary of the Termination Date.
Nothing in this Agreement shall confer upon Xxxxxxxxxxx any right to continue in
the employ of NCI or interfere in any way with the right of NCI to terminate or
otherwise modify the terms of Xxxxxxxxxxx'x employment.
7. Change of Control. Notwithstanding anything in this Agreement to
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the contrary, unless the Options or any portion thereof shall have been earlier
terminated in accordance with Sections 5 and 6 hereof, the unvested portion of
the Options shall vest, and the Options shall become immediately exercisable in
its entirety immediately prior to a Change of Control (as defined in the
Employment Agreement).
8. Securities Law Acknowledgments. Xxxxxxxxxxx acknowledges that the
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shares of Common Stock issued upon exercise of the Options may not be registered
under applicable securities laws, that such shares of Common Stock purchased
upon the exercise of the Options must be held indefinitely unless subsequently
registered under the applicable securities laws or unless an exemption therefrom
is available, and, at the election of NCI, such certificates may bear such
legends regarding the limited transferability of the shares of Common Stock
under applicable securities laws as counsel for NCI may require. The shares of
Common Stock issued pursuant to the terms of this Agreement shall represent
fully paid and non-assessable shares of Common Stock. . On or before the
earlier to occur of the first anniversary of this Agreement or the termination
of Xxxxxxxxxxx'x employment by NCI without Cause or upon a Change of Control (as
such terms are defined in the Employment Agreement), NCI shall prepare and file
a
registration statement on Form S-8 or such other appropriate Form under the
Securities Act of 1933, as amended (the "Act") and, if effectiveness is not
automatic, use its best efforts to cause such registration statement to become
effective as promptly as practicable. Thereafter, NCI shall maintain the
effectiveness of the registration statement until all of the Shares may be sold
without restriction under the Act.
9. Name References. Whenever in any provision of this Agreement
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reference is made to Xxxxxxxxxxx, under circumstances where such reference
should logically be construed to apply to the executors, administrators or
person or persons to whom the Options may be transferred by will or by the laws
of descent and distribution, the reference to Xxxxxxxxxxx shall be deemed to
include such person or persons.
10. Non-Transferability. The Options are not transferable by
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Xxxxxxxxxxx otherwise than by applicable laws of descent and distribution and,
except as set forth herein, are exercisable during Xxxxxxxxxxx'x lifetime only
by Xxxxxxxxxxx. No assignment or transfer of the Options, or of the rights
represented thereby, whether voluntary or involuntary, by operation of law or
otherwise (except by will or the laws of descent and distribution), shall vest
in the assignee or transferee any interest or right herein whatsoever, but
immediately upon such assignment or transfer the Options shall terminate and
become of no further effect.
11. Rights as Stockholder. Xxxxxxxxxxx shall have no rights as a
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stockholder with respect to any share of Common Stock covered by the Options
until Xxxxxxxxxxx shall have become the holder of record of such share of Common
Stock, and no adjustment shall be made for dividends or distributions or other
rights in respect of such share of Common Stock for which the record date is
prior to the date upon which Xxxxxxxxxxx shall become the holder of record
thereof.
12. Adjustment for Recapitalization, Merger, Etc. The aggregate
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number of shares of Common Stock that may be purchased pursuant to the Options,
the number of shares of Common Stock covered by the Options and the price per
share shall be appropriately adjusted for any increase or decrease in the number
of outstanding shares of Common Stock resulting from a stock split or other
subdivision or consolidation of shares of Common Stock or for other capital
adjustments or payments of stock dividends or distributions or other increases
or decreases in the outstanding shares of Common Stock effected without receipt
of consideration by NCI.
Subject to any required action by the stockholders, if NCI shall be
the surviving corporation in any merger, combination, consolidation or other
business transaction, the Options shall cover the securities to which a holder
of the number of shares of Common Stock covered by the unexercised portion of
the Options would have been entitled pursuant to the terms of the merger or
consolidation.
Upon any dissolution or liquidation of NCI, the Options shall
terminate; provided, however, that the surviving corporation may grant an option
or options to purchase its shares on such terms and conditions, both as to the
number of shares and otherwise, which shall
substantially preserve the rights and benefits of the Options. Any such
adjustments may provide for the elimination of any fractional share which might
otherwise become subject to the Options.
13. Compliance with Law. Notwithstanding any of the provisions
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hereof, except in connection with a Change of Control or the dissolution or
liquidation of NCI, Xxxxxxxxxxx hereby agrees that Xxxxxxxxxxx will not exercise
the Options, and that NCI will not be obligated to issue or transfer any shares
of Common Stock to Xxxxxxxxxxx hereunder, if the exercise hereof or the issuance
or transfer of such Common Stock shall constitute a violation by Xxxxxxxxxxx or
NCI of any provisions of any law or regulation of any governmental authority.
14. Notice. Every notice or other communication relating to this
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Agreement shall be in writing and shall be mailed to or delivered to the party
for whom it is intended at such address as may from time to time be designated
in a notice mailed or delivered to the other party as herein provided; provided
that, unless and until some other address be so designated, all notices or
communications by Xxxxxxxxxxx to NCI shall be mailed or delivered to NCI at its
executive offices currently located at 000-00 Xxxxxx Xxxxxxx Xxxxxxxxxx, Xxxxx
Xxxxxxx, XX 00000, or such other location as shall then be NCI's principal
corporate office, Attn: Chairman; with a copy to Xxxx X. Xxxxxxx, Esq., Piper &
Marbury, LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000, and all notices
or communications by NCI to Xxxxxxxxxxx may be given to Xxxxxxxxxxx personally
or may be mailed to Xxxxxxxxxxx at 00 Xxxxxxxxx Xxxxxx, Xxxxxx Xxxx, XX 00000.
15. Entire Agreement. This Agreement sets forth the complete
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understanding of NCI and Xxxxxxxxxxx with respect to the subject matter hereof
and supersedes all prior understandings, whether oral or written.
16. Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of New York (without giving effect to
principles of conflicts of law).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
NEWS COMMUNICATIONS, INC.
By: /s/ Xxxxxx Xxxxxxx
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Name: Xxxxxx Xxxxxxx
Title: President and Chief Executive Officer
/s/ Xxxx Xxxxxxxxxxx
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Xxxx Xxxxxxxxxxx
EXHIBIT A
The Options shall be subject to accelerated vesting such that 10% of the
shares issuable upon exercise of the Options shall vest for each cumulative $.05
of EBITDA Improvement on a per share basis. For the purpose herein, EBITDA
shall mean, with respect to any fiscal year of NCI, earnings of NCI for such
year before interest (including without limitation the interest component of any
capital lease obligation), taxes, depreciation and amortization for such year.
For purposes of the foregoing,
(i) "EBITDA" shall mean with respect to any period, earnings of NCI
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for such period before interest (including without limitation the interest
component of any capital lease obligation), taxes, depreciation and amortization
for such period; provided, that for purposes of determining EBITDA, (i) cash and
non-cash compensation expenses resulting from Xxxxxxxxxxx'x equity arrangements
shall, to the extent deducted from earnings in calculating EBITDA in accordance
with generally accepted accounting principles, be added back to earnings in
calculating EBITDA and (ii) earnings shall exclude earnings from extraordinary
items, including net gains or losses from sales of assets (other than asset
sales in the ordinary course of business) or sales of stock. In comparing
EBITDA of NCI at two different points in time, the parties agree that the
determination of EBITDA shall be adjusted on a basis acceptable to both parties
to reflect extraordinary, non-recurring items and events, such as acquisitions
and divestitures and other corporate events which have occurred during the time
period between the two such reference points in time.
(ii) "EBITDA Improvement" shall mean the amount by which EBITDA on a
per share basis exceeds EBITDA on per share basis as of the end of the fiscal
year ended November 30, 1998.
